EVERYTHING YOU NEED TO KNOW
GUIDE TO BUYING
SO YOU’RE READY TO PURCHASE A HOME
BUYING A HOME IS AN EXCITING INVESTMENT.
It goes without saying that buying a home – whether it’s your first home or not – is one of the most exciting purchases
you’re ever going to make. But it’s probably also going to be one of the most important investment decisions you make in
your life, one that requires a great deal of thought.
Buying a home is different to nearly all the other purchases we make – you don’t buy a home every day, and there are things
that you need to be aware of when going through the process of purchasing a property.
This guide will steer you in the right direction, from looking at what questions to ask, to ensuring that you’re making the
right choice, to explaining the ins-and-outs of a bond application and registration. It will help you prepare for what’s ahead,
so that you can enjoy the excitement of buying your first home, instead of worrying about what’s around the corner.
I’M INTERESTED IN BUYING A PROPERTY
DECIDE WHAT IT IS YOU’RE LOOKING FOR. THINK ABOUT:
• Your price range – your monthly budget and what you can afford.
• Your ideal neighbourhood. What other areas would you be happy to live in?
• Would you prefer a free-standing house or the additional gated security of a complex?
• Size of house/flat/land.
• The number of bedrooms/bathrooms you require.
• Do you need an outdoor space? (garden, balcony, pool, braai area etc.)
• Parking requirements.
• What facilities do you need to be close to (schools, shops, parks etc.)
• Are you prepared to renovate?
LOOK, LOOK AND LOOK AGAIN:
• Newspapers/magazines – scour the weekly property sections that come in the Saturday or Sunday newspapers. There are also free property magazines that come out weekly.
• Websites – some websites operate independently of estate agents. Properties listed on these sites may be slightly cheaper as the seller may not need to pay agent’s commission which can be as much as 7.5% of the selling price.
• Most estate agencies will also list the properties they’re selling on their own websites, plus there are sites that show properties for sale by all agencies.
• Visit show houses. Most show houses are on Saturdays or Sundays and generally start at 2pm and end at 5pm. This is probably the best way to view a property. Photos can tell you a lot, but they won’t show you the neighbourhood and definitely won’t highlight problems with the property or the neighbourhood.
TAKE A GOOD LOOK AT WHAT YOU CAN AFFORD:
The purchase of a new home comes with a string of new bills. Not only will you now have a monthly bond instalment to pay, but there are a number of additional costs which you may not have had to pay as a tenant. These include:
• Rates payable to the municipality.
• Levies (if you’re in a complex/flat).
• Electricity and water.
• Household insurance (for the contents of your home) and homeowner’s insurance (for the building).
• Repairs and maintenance (looking after a garden, painting the house, plumbing problems etc).
MAKE SURE YOU UNDERSTAND THE DIFFERENCE BETWEEN “FREEHOLD”, “SECTIONAL TITLE” AND “SHARE-BLOCK” DEVELOPMENTS:
• Freehold or full title describes the transfer of full ownership rights when you own a property, which includes the building and the land it is built on. These kinds of properties include free- standing houses, cluster house etc.
• Sectional title describes separate ownership of units or sections within a complex or development. When you buy into a sectional title complex, you purchase a section or sections and an undivided share of the common property. These are collectively known as units. Sectional title dwellings comprise of mini sub-type houses, semi-detached houses, townhouses, flats or apartments and duet houses.
• In a share-block the property is owned by a company and each flat is allocated a number of shares in the company.
• Very few financial institutions will bond share-block flats, and those that do normally require a hefty cash deposit and will often charge a higher lending rate than they would for a sectional title flat.
• All of which means that if you’re interested in a share-block property you will need to have a fair amount of capital upfront.
* This table is for illustrative purposes only and is based on an interest rate of 13% p.a. A lower interest rate means that you will be able to afford higher instalments and thus be able to borrow a larger sum.
R12 000 R18 000 R26 000 R40 000 R60 000 R3 600 R5 400 R7 800 R12 000 R18 000 R305 000 R460 000 R660 000 R1 000 000 R1 500 000
GROSS MONTHLY INCOME MAXIMUM INSTALMENT MAXIMUM LOAN
Our website has
which will assist you in
calculating your instalments – or you can refer to the
table below for an illustration* of maximum loan
amounts and instalments for income levels:
BE AWARE OF THE HIDDEN COSTS INVOLVED IN PURCHASING A HOME:
In addition to the purchase price of the property, there are a number of upfront costs involved in buying a home. It’s important that you’re aware of these additional expenses so that you can save up the money or arrange a loan to cover these costs. Below is a brief explanation of these items:
• ‘Transfer duty’ is paid to SARS every time a property changes hands, and is based on the value of the property. Properties with a value of R750 000 or less are not subject to transfer duty.
• ‘Transfer fees’ are payable to the transferring attorney for transferring the property into your name, and are calculated on a regulated sliding scale based on the purchase price. Note that the R750 000 exemption does not apply to ‘transfer fees’, only to transfer duty.
• If the property is being purchased from a developer, no transfer duty is payable. However, VAT will be payable on the purchase price.
• You will also need to pay an attorney to register your bond with the Deeds Office. This is known as the bond registration fee.
• The attorney will also charge you for other smaller, variable costs such as FICA fees, electronic instruction fees and postage. These amounts may differ from attorney to attorney, but typically come to around R2 000.
BELOW IS A TABLE OF APPROXIMATE COSTS TO GIVE YOU AN IDEA OF WHAT TO EXPECT. THESE AMOUNTS INCLUDE VAT AND MAY DIFFER FROM ATTORNEY TO ATTORNEY.
R520 000 R750 000 R1 000 000 R2 000 000 Nil Nil R7 500 R45 000 R10 240 R11 380 R13 660 R20 600 R7 458 R9 283 R11 107 R15 512
PURCHASE PRICE TRANSFER DUTY TRANSFER COSTS REGISTRATION
GET YOUR AFFAIRS IN ORDER:
Pay your bills on time every month in order to ensure that you have a good credit rating. It’s also a good idea to try and clear as many debts as possible before applying for a home loan, since lending institutions will look at existing debt obligations when assessing whether or not to approve a loan application.
Contact SA Home Loans to find out what bond you qualify for. Although pre-approval doesn’t guarantee a home loan, it does give you a clear idea of what you can afford to spend, and means you are more likely to be taken seriously by the seller. As a rough guide, your instalment should not be more than 25%-30% of your family’s combined monthly income, before tax and deductions. This is known as you ‘Payment to Income’ (PTI) ratio.
FINDING THE RIGHT HOME FOR YOU
Once you’ve found a home you like, it’s important that you take the time to consider whether or not it really is the right home for you. Here are some tips to help you make the right decision:
• Visit the property at different times of the day – a house or flat can look very different at night to how it looks during the day. Ask if you can see the property in the morning, afternoon and evening, so you understand how light affects the way the property looks and feels. This will also allow you to see what the neighbourhood is like after dark, and how much traffic there is during evening rush hour.
• Take a camera with you so that your memory doesn’t play tricks on you.
• Establish which direction the property is facing. In South Africa, a north-facing house will be warm in winter and cool in summer.
GIVE THE PROPERTY A THOROUGH INSPECTION.
Sellers are legally required to get an electrical and borer certificate, but problems with plumbing, foundations, roofing etc. can also be very costly to fix. It’s worth taking the time to conduct a proper examination of the property before you seal the deal.
Anyone selling a house in Cape Town must provide a certificate from a certified plumber stating that the plumbing in the property complies with National Building Regulations and is in good working condition. Plumbing certification has become law in the Western Cape and will be enforced by city officials. Without the compliance certificates the sales process may be delayed.
The new Consumer Protection Act puts buyers in a much stronger position when purchasing a property from a developer or a previous owner – developers and sellers are now legally required to fully disclose the condition of the property, i.e. the “voestoets” clause no longer applies as a blanket protection for developers or other businesses or agents who sell property in their ordinary course of business. It may however, still be included in sales agreements concluded privately between ordinary sellers and buyers. For this reason it is beneficial to employ the services of a professional home inspection company to provide a report on the true state of the property.
HOMES4ME MOBILE APP
House hunting can be fun – but overwhelming. How do you remember all the homes you’ve looked at and which features appealed to you and what you did not like?
We’ve addressed that problem with a handy mobile app – Homes4Me –
that allows you to record all details of the homes you visit and compare them at your leisure.
This handy little app allows you to:
• Build your personal checklist – highlighting what you want from a home – such as number of bedrooms, number of bathrooms and location to schools etc.
• Create a ‘visited properties’ list – recording photos of homes you have seen, prices, agent’s name, your personal comments – and even geotag their locations.
• Choose your favourites – and rank them according to your checklist, allowing you to compare them and save the homes you like the most.
DOWNLOAD HOMES4ME NOW
You can download Homes4me free on our website if you have an Android, BlackBerry or iPhone device. Alternatively, you can use the Homes4Me app on our mobile site m.sahomeloans.com that allows you to record all details of the homes you visit and compare them at your leisure.
ASK THE FOLLOWING QUESTIONS:
• Why are the owners selling and for how long have they lived there?
• What are the neighbours like?
• Have the owners experienced any crime in the past two years? You may also want to check with SAPS regarding crime in the area.
• How much are the monthly levies/rates?
• What security systems are in place and is the fencing adequate?
HAVE A LOOK AT YOUR SURROUNDINGS:
• Is the neighbourhood clean?
• Is there easy access to shops and schools?
• A cooling-off period of five days is generally included on properties with a value of R250 000 or less. In cases where a cooling-off period is included in the ‘Offer to Purchase’, the buyer has the option of withdrawing the offer within the five day period.
• A 72- hour clause is often included in an ‘Offer to Purchase’. This clause allows the seller to continue looking for an alternative buyer even after the ‘Offer to Purchase’ has been accepted. This applies to offers that are subject to conditions (e.g. bond approval/sale of buyer’s current house). If the seller accepts another offer, the buyer will have 72 hours to fulfill the conditions on the original ‘Offer to Purchase’.
• Make a list of items that should be included with the sale such as automatic pool cleaner, garage remotes, blinds, etc. Be very specific and detailed.
MAKING AN OFFER TO PURCHASEDon’t be afraid to make a lower offer. People sometimes feel
embarrassed to make an offer substantially lower than the asking price. If you really like a property, but can’t afford the asking price, it won’t do any harm to ask if the owners will take a lower offer.
Should you wish to make an offer on the property, the seller or estate agent will ask you to sign an ‘Offer to Purchase’. This is a serious legal document and you need to be aware of the following:
• An ‘Offer to Purchase’, once signed by both parties, constitutes a ‘Deed of Sale’.
• Ensure that an ‘offer expiry date’ is included. This puts pressure on the seller to accept or reject the offer within a reasonable amount of time.
• Decide on an ‘occupation date’. This can either be on transfer of the property into your name, or at an earlier date, in which case ‘occupational rent’ will be charged.
• ‘Occupational rent’ will be negotiated with the seller and should be in line with the market- related rental for the property.
• Sometimes buyers will pay a deposit as a sign of good faith. The ‘Offer to Purchase’ must state that the deposit will be held in an interest bearing trust account until transfer, and that the buyer will be entitled to receive the interest earned when the deposit is released. It is advisable to use only Attorney accounts for this deposit.
MY OFFER HAS BEEN ACCEPTED
MY OFFER HAS BEEN ACCEPTED, WHAT HAPPENS NOW?
• Contact SA Home Loans to secure your bond.
• You’ll need to submit all the necessary documents to get the ball rolling (see list here).
• SA Home Loans will provide you with an “Approval in Principle” within 2 working days of receiving all your necessary documentation.
• Within three working days, one of our expert appraisers will value the property.
• Subject to credit approval, we’ll prepare a home loan proposal, called a “Letter of Acceptance”, detailing the costs, interest rate, predicted instalments and other important information for you to evaluate and sign.
• Our national panel of Attorneys will prepare all the necessary bond registration documents and will make an appointment with you to sign the documents.
• Ensure that your good credit record is maintained. Should circumstances change and your credit record deteriorate prior to registration, the approval of your bond could be reversed. For example, maintain all your debt repayments and avoid borrowing additional money to spend on renovations prior to the home being transferred into your name. New debt obligations and unpaid accounts will affect your credit record and your ability to afford your home loan and could result in your loan being declined.
GET TO GRIPS WITH THE CRITERIA USED IN ASSESSING A BOND:
• One of the aims of the National Credit Act (NCA) is to ensure that people don’t become over indebted. In order to ensure that this doesn’t happen, lending institutions are required to properly evaluate your past and present spending and payment habits, how much you currently owe to other lenders, and what your repayment obligations are in respect of these debts. The NCA will only affect your application negatively if you are trying to secure a mortgage that exceeds your disposable income.
• If your application is declined as a result of your credit
rating, you can obtain the details of the particular credit bureau from the lender. If the credit bureau information is inaccurate (for example, it reflects debt obligations which are incorrect) you can lodge a dispute with the bureau. If the credit bureau updates its records because it had recorded incorrect information, then it will also advise all other credit bureaux of the changes; and any credit providers which had requested information in the previous 20 days will also be advised that incorrect information has been removed.
• Loan to value (LTV) is one of the risk assessment tools that lending institutions use when considering a bond application. Assessments with high LTV ratios are generally seen as higher risk and, if the loan is approved, will generally cost the borrower more to borrow. LTV is calculated by dividing the loan amount by the value of the property.
• Payment to Income (PTI) or Instalment to Income (ITI) is the basic affordability measure in mortgage lending decisions, and is the ratio of your monthly bond instalment to your monthly income before taxes. Your PTI should not exceed 30%.
MAKE CERTAIN YOU UNDERSTAND THE TERMS OF YOUR MORTGAGE LOAN:
Generally speaking, the term of a bond is 20 years, with some lenders offering 30 year bonds under certain circumstances. However, you can make additional payments into your home loan or pay more than your required monthly instalments, thus reducing the time it takes to pay off your home loan. Putting additional money into your home loan dramatically reduces the total amount of interest paid during the loan period.
THERE ARE A NUMBER OF DIFFERENT OPTIONS AVAILABLE WHEN IT COMES TO SELECTING YOUR BOND INSTALMENTS:
• With a standard home loan, the interest rate you pay is linked to the ‘Repo rate’ (the rate at which the Reserve Bank lends money to banks and financial institutions). This means that your interest rate and monthly instalment rise and fall along with economic conditions in the country.
• SA Home Loans uses JIBAR – the Johannesburg Interbank Agreed Rate – as the base rate for our bond lending rates. Like Prime, this is closely linked to the Repo rate. SA Home Loans reviews bond rates every 3 months in line with movements in JIBAR. This is different to the banks, which
will move their bond rates immediately following a change in the Repo rate. For a full explanation of JIBAR, see www.sahomeloans.com
• Some lending institutions also offer short-term fixed rates or a CAP option which caps the interest rate on a home loan for a specific period of time.
• The standard home loan offered by most lenders in SA usually has a 20 year term; however 30 year bonds are also available. A 30 year bond carries a lower instalment, which offers greater cash flow flexibility and can be helpful for home buyers at the beginning of the life of their loan. However, it’s important to note that the total cost of a 30 year bond is higher than a 20 year bond, since the interest repayment is calculated over a longer period.
• SA Home Loans also offers ‘Edge’ home loans – where you’re required to pay only the interest for the first 36 months. Thereafter your monthly repayment will revert to a fully amortising instalment for the remaining 240 months – this loan structure can be helpful during the first few stretch years of a new home loan.
FAMILIARISE YOURSELF WITH THE MORTGAGE PROCESS/TIMELINE:
• It will generally take 8 to 12 weeks from bond approval for your transfer to take place.
• The first step is to appoint attorney(s) to attend to your bond cancellation (if applicable), the transfer of the property and your bond.
• The seller has the right to choose the attorney, although an attorney of your choice can be agreed with the seller. You, the buyer, are responsible for all attorney fees, as well as rates and taxes on the property, which are paid in advance in order to obtain a rates clearance certificate.
• Once all documents have been signed by both parties and the costs paid, the documents will be lodged with the Deeds Office.
• Payment to the seller will be made on registration of the bond, normally 7 to 10 days after the documents have been lodged with the Deeds Office
HOME OWNER’S COVER:
• Home owner’s insurance must be taken out by the home owner on the property that is bonded. This is required by all home loan lenders to ensure that their financial risk is protected should the structure of the dwelling suffer damage in the event of an insured occurrence such as accidental damage, fire, storms, burst geyser etc.
• Sectional title units will have home owner’s insurance included in their monthly levies. However, you need to check with the body corporate that the insured amount is at least as much as that required by the home loan lender.
BOND PROTECTION COVER:
While not compulsory, bond protection insurance is recommended as it covers repayments if the bond holder is unable to pay the bond instalments due to death or disability.
AFFORDABLE HOUSING PACKAGE:
In order to allow more South Africans to achieve their dream of home ownership, SA Home Loans offers home finance packages to households with a combined household income from R8 000 per month.
• Preferential interest rate which is variable and tailored to your risk profile.
• Up to 100% of the purchase price, depending on your risk profile.
• Flexible term up to 20 years.
• Bond attorney costs discounted by 50% unless they are covered by the developer.
• Payment options for Debit Order or Salary Stop Orders (for government employees).
• Free access to My New Home, an online course that provides all the necessary information to empower new home owners with the knowledge to make a success of their journey as home owners.
• In-house insurance options are available: bond protection and home owner’s cover.
The Finance Linked Individual Subsidy Programme (FLISP) provides qualifying first time home-buyers with a subsidy of up to R87 000 that may be used as a deposit or a lump sum payment into the bond account. Discuss with your consultant or see our website for more details on how to apply.
* Note: Copy of Purchase Agreement is not required if client is switching from an existing financial institution to SA Home Loans.
You’ll need to provide all the required documents in order to get your home loan application processed. Be aware that any missing documents may cause delays – so have these ready before you apply to ensure the fastest possible service!
• Proof of Income/Latest Payslip
• Copy of ID
• Copy of Marriage Certificate or ANC Contract
• Copy of Purchase Agreement*
• 3 months Personal Bank Statements
• For Commission Earners: proof of last 3 months
• Statement of Personal Assets and Liabilities for loans
of over R1.5m
• Proof of Income/Accountant’s Letter Confirming Income
• Copy of ID
• Copy of Marriage Certificate or ANC Contract
• Copy of Purchase Agreement*
• 6 months Personal Bank Statements
• 6 months Business Account Bank Statements
• Last 2 years Financial Statements. Where Annual Financial
Statements are older than 6 months, Management Accounts
not older than 2 months signed by the applicant and
accountant must be provided in addition to the Annual
• Copy of Registration Documents or Trust Deed
• Statement of Personal Assets and Liabilities
STEP BY STEP GUIDE TO HOME FINANCE
1. ARM YOURSELF WITH INFO
Before you start the process, make sure you know what you can afford. Speak to a consultant or use the online Mortgage Calculator to establish how much bond finance you qualify for based on your income or joint income.
2. SET THE PROCESS IN MOTION
You will now need to make a formal application. You can select to do this online or you can call the Contact Centre on 0860 2 4 6 8 10. Alternatively, you can contact the branch nearest you for personal attention. It’s not a complicated process – and a consultant will happily guide you through the process if you are unsure.
4. APPROVAL IN PRINCIPAL
At this point, and provided you have supplied all the required documentation, it will be possible for SA Home Loans to give you an AIP (Approval In Principal) within 48 hours. This is based on the basic information you have supplied regarding your income, affordability and credit worthiness.
5. VALUING THE PROPERTY
Once you have earmarked a property and made an offer to purchase to the owner (normally via an estate agent) and it has been accepted, SA Home Loans will arrange an appointment for an expert appraiser to value the property you intend to purchase. They will speak to the owner or the estate agent to arrange this. This usually takes about 3 working days to complete.
6. CREDIT APPROVAL
Once the property is valued, the information you have supplied is verified and assessed in depth. If this is all in order, the process will continue. If there is a problem, you will be contacted by a consultant to discuss a possible solution.
7. SIGNING THE LETTER OF ACCEPTANCE (LOA)
With your credit approved, a home loan proposal – called a ‘Letter of Acceptance’ will be drawn up. This details all the costs, the interest rate, indicative monthly instalment and other important information for you to evaluate and sign. Your consultant will go through these costs and details with you.
Now the legal process begins! An attorney (from our national panel) will prepare all the necessary bond registration documentation and will make an appointment with you to sign them. Arrange to sign as soon as you are contacted, so that the process is not delayed. The attorney will go through the documentation in detail with you.
Once you have signed the documentation, the attorney will ‘lodge’ your bond for registration.
From the date that the Deeds Office registration takes place, you are the legal owner of your new property. You will now start paying your bond instalments – as well as insurance, and all rates, taxes and utility costs relating to your home.
Your bond now needs to be registered at the respective Deeds Office. This is a legal process and can take up to 8 - 12 weeks. Your attorney will notify you once this takes place.
3. GATHER ALL THE NECESSARY DOCUMENTATION
This is the most important part of the process from your side. You will be informed about the documentation required to accompany your application. Getting all the required up to date documentation together right upfront will speed the process up considerably. Once your consultant has this, they will do the rest. But they can’t progress without the right documents!
MAKING YOUR BOND WORK FOR YOU
A home is a serious investment, and like all investments, it needs to be managed properly in order to ensure that you get the best possible return. But few people, once they’ve had their bond registered and start repaying the loan, give their most important investment another moments thought. Yet there are a number of important steps that a homeowner can take to ensure that their hard-earned money is being put to good use:
INCREASE YOUR BOND REPAYMENT:
When you borrow money to purchase a home you are in effect taking out two loans. The first loan is to repay the capital amount (known as the principal sum) and the second loan is to repay the interest charged over the period of the loan. The majority of the money you repay in the first years of having a home loan goes towards paying back this interest, which will only marginally reduce the principal sum. In South Africa, interest is generally calculated daily on your mortgage. In effect this means that the amount you owe the bank increases every day. Because of the nature of compound interest, regular additional repayments made at the beginning of your loan term will have a much greater effect on the cost of your bond than if you start paying extra cash into your bond account five or ten years down the line. However, even if you are already a number of years into your loan term, you can still make a considerable saving by paying additional money into your bond. By increasing your monthly instalments, you’ll reduce the term of your bond, which means that you won’t be paying heavy bond instalments in later years. The end result is that you will have paid less money in interest over the term of the loan.
There are a number of easy ways that you can put additional money into your bond without really feeling the difference in your pocket:
• Put the additional income you receive from your annual salary increase into your home loan
• When interest rates decrease contact your lender and ask them to maintain the instalment that you were paying prior to the drop in lending rates
• Put a portion of your annual bonus into your bond
At SA Home Loans you may put extra money into your bond any time you want to. Every little bit helps. Making a prepayment when the loan registers is particularly helpful, as you will reduce the capital amount immediately, significantly reducing the total interest payable over the term of the loan.
USE YOUR BOND AS AN INTEREST-BEARING SAVINGS ACCOUNT:
Banks are in business to make profit, so it makes sense that they charge a higher interest rate to people borrowing money from them than they do to investors who deposit funds with them. For example, you might be receiving 2% interest on a positive balance for money in your savings account, but are probably being charged a much higher rate for the money you’ve borrowed to pay off your home loan. By depositing your savings into your bond, you are in affect receiving the interest rate that the bank charges you on your loan as positive interest on the money you invest. For example, if you have a bond for R1 million, and you deposit an extra R100 000 into your home loan, you are now no longer being charged interest on R1 million, but rather on R900 000. The money you save in interest over the time that you keep the R100 000 in your home loan is the positive interest you are in effect receiving on the money you’ve deposited. Plus you can withdraw this cash when you need it without being penalised. At SA Home Loans, clients may make six withdrawals per annum of amounts greater than R10 000.
CONSOLIDATE YOUR DEBT
Interest rates charged on home loans are generally a lot lower than the rates you will pay for vehicle finance, credit cards and store accounts. So it makes financial sense to consolidate these debts into your home loan. But of course home loans are calculated over a much longer period than these other short-term loans, so it’s imperative that you maintain the instalment you were making prior to moving the debt across to your home loan in order to pay it off over the same time period. If you pay the short- term loan balance off over the full life of the home loan – often 20 years or more – it will end up costing you a lot more in interest.
BUILD UP A GOOD CREDIT HISTORY:
You can build up a good credit history by repaying your home loan on time every month. Lending institutions will look at an applicant’s credit history when deciding whether or not to grant a loan, and will also consider their credit rating when determining what interest rate to charge a client. Thus, by paying off your home loan in a responsible manner, you might end up saving yourself money in terms of lower interest rates on future loans.
WHAT MUST I DO IF I CAN’T PAY MY HOME LOAN INSTALMENT?
• Communicate with your lending institution. If you are having trouble paying your monthly home loan instalment, the most important thing that you must do is to tell your lender about the problem. People often try to avoid contacting their lender because they don’t want to face up to the situation they’re in, or fear they will be reprimanded. Most lending institutions will have special departments to help clients with payment problems – for example, SA Home Loans offers “Bond Assist” to help clients to restructure their bond repayments, depending on their individual circumstances. By contacting the lending institution you may be able to make an arrangement to help you out of your crisis. Depending on your payment history, your circumstances and whether your difficulties are likely to be long or short term, your lender might agree to:
• Allow you to pay off the arrears gradually, alongside your usual payments • Extend your mortgage term to reduce your payments
• Let you stay in your home while you try to sell the property and find somewhere else to live. This is preferable to foreclosure, in which case you will lose your home and, if the loan amount exceeds the amount for which your house is sold, you will still be indebted to the bank. SA Home Loans offers “Sell Assist” to clients who find themselves in need of this.
• Suggest other assistance, such as debt counselling* to help with your financial difficulties * A debt counsellor is someone who is registered with the National Credit Regulator and who assists people who are having difficulty making their monthly payments. He or she will provide advice on how to budget your money and will negotiate with credit providers on your behalf. Consumers can contact the National Credit Regulator on 0860 627 627 or log on to www.ncr.org.za for additional information regarding debt counselling.
• Always pay what you can. Pay as much as you can manage every month. Keeping up regular payments shows that you’re committed to repaying your mortgage and doing the best that you can. Your lender is more likely to treat you sympathetically. By paying small amounts you'll also minimise the arrears charges.
LOOKING AFTER YOUR INVESTMENT: Maintaining your home
Owning your own home is a wonderful thing, but with it comes the responsibility of looking after the property in order to ensure that the money you’ve invested isn’t thrown away. Houses require a lot of time and money to keep them in good condition, but this is money well spent – since it is far more expensive to replace items than it is to maintain them.
Pay special attention to the following areas in your home:
• Wooden door and window frames. The weather in South Africa can be very harsh on items such as wooden frames. To prevent wooden frames from rotting, homeowners should varnish their wood as and when needed, which might be as often as every six months. It’s also important that people who have wooden floors keep a lookout for borer and other wood-eating insects.
• Clean your gutters regularly. Gutters that aren’t cleaned out will become ineffective over time and may cause damage to your walls and ultimately your foundations. Maintaining your gutters will also mean they will last for years to come.
• Paintwork If your house needs repainting, it’s better to spend the money on a good quality paint as this will save you money in the long term. Ensure that outside walls are cleaned regularly.
• Swimming pools must be maintained regularly in order to avoid structural problems or the need for resurfacing. Check the pH balance every two weeks and backwash your pool once a week.
• A beautiful garden can increase the value of your property significantly. Make sure that your garden is well-kept and think about investing in indigenous plants. Indigenous gardens are easier to maintain and are becoming more and more popular with home buyers. Additionally, they use fewer resources such as water and fertiliser.
Monitor developments in your neighbourhood:
It’s important that you’re aware of any developments in your neighbourhood that may have a negative or positive impact on the value of your home. If you’re proactive about the area you live in, you won’t be taken by surprise and may be able to have a say regarding any potential changes in your neighbourhood. The following are some of the things that you can do to make an impact:
• Participate in local police forums
• Hold regular neighbourhood meetings to discuss issues that affect your community, such as crime or litter
• Take note of any new buildings or renovations
• Make sure that you know the name of your ward councillor
Making additions to your home or renovating existing spaces can be a nerve-wracking process but, done intelligently, the money you spend can turn out to be a wise investment. The rule of thumb is that renovations to bathrooms and kitchens are most likely to increase the value of your property, but adding additional space to your house can also serve you well. Not only will you increase the value of your property, but by adding a garden cottage or similar structure, you are also providing the means to gain rental income which can be used to help pay off your bond.
If you are thinking about making home improvements, you should be aware of the following:
• Ensure that you have planning permission if necessary
• Try to use a builder who is registered with the National Home Builders Registration Council (NHBRC)
• Research the prices of similar properties in your neighbourhood, so that you don’t make the mistake of over-capitalising your property
• Be aware that building work nearly always takes longer than you or your builder think it will, and often costs considerably more than the original quote
If you need funds for home improvements, speak to us about the ways in which you may do this, as borrowing against your home is often your cheapest source of finance. We have various further lending options for existing clients, while new clients who are switching to SAHL may be able to get Quick Cash.
UNDERSTANDING THE JARGON
HERE ARE SOME OF THE LEGAL AND COMMERCIAL TERMS USED IN PURCHASING AND FINANCING A HOME – EXPLAINED IN SIMPLE WORDS!
AGREEMENT OF SALE
A written contract between seller and buyer that records the terms and conditions of the sale of a property, often referred to as a deed of sale.
AIP (APPROVAL IN PRINCIPAL)
This is a document given by SA Home Loans once all personal details and all required personal documents have been assessed. This can be provided within 48 hours provided all documentation is provided timeously.
Mortgage Loan: A loan made to the owner of a property where the property is the security for the loan. The loan amount or a greater amount is registered in the Deeds Office against the title deed of the property.
Life assurance on the life of the borrower to cover the amount owing on the bond.
Short-term loan to cover the time until a person receives funds anticipated, usually from a transaction in progress, to conclude another transaction.
This is a loan one would take to build a house and is not typically available through SA Home Loans.
CAPITAL GAINS TAX
Taxpayers, including individuals, trusts, companies and corporations, will be taxed on the profit they make when they sell an asset or property of capital nature, usually where there is a change in ownership. This is basically a tax on the resale of profits, and may apply to your primary residence if the capital gain exceeds R1.5 million or if the proceeds exceed R2 million. See the SARS website for further details.
The transfer of rights to another e.g. the transfer of rights of ownership.
COOLING OFF PERIOD
This is a clause included in an offer to purchase or a sale agreement. A buyer may be entitled to revoke his/her offer or terminate the sale within the 5 day “cooling off” period.
CONSOLIDATION OF DEBT
The replacement of multiple loans with a single loan, to achieve a lower monthly payment. This may entail replacing more expensive finance (e.g. hire purchase, bank overdraft, credit card) with cheaper and longer term finance – such as a further loan from a mortgage bond.
An attorney (lawyer) qualified to prepare documents and attend to the transfer of a fixed property and the registration of mortgage loans.
COSTS (OR COVER) CLAUSE
Provision in a mortgage loan document securing an amount over and above the money lent, to cover potential costs such as: penalties, legal fees, costs of attachment, interest, etc.
Legal term for a formal legal document that is signed, witnessed and delivered to effect a conveyance or transfer of property or to create a legal obligation or contract.
DEED OF SALE
An Agreement of Sale: A written contract between seller and buyer that records the terms and conditions of the sale of a property.
The government department where rights and interests in immovable property are registered. These are regionally located.
The amount of money a customer has available to contribute towards the purchase of the property.
DOMICILIUM CITANDI ET EXECUTANDI
A physical address where the delivery of legal notices will be accepted by a party to a written agreement.
A person who is employed by a business enterprise, receives a monthly salary, but has no significant ownership of the enterprise.
A material shareholder or principal of a Company, a CC or a Sole Proprietor. Proof of income would be in the form of a letter from an accountant/ bookkeeper stating monthly take-home earnings, and supported by bank statements.
A housing allowance forms part of the remuneration package and the employer deducts bond repayments directly off the salaries of employees. These are usually offered by government employers, municipalities and the like.
The amount by which the value of a bonded property exceeds the amount owing on the loan.
The amount by which the amount owing on a bonded property exceeds the value of the property.
The SA Home Loans Home Owners Comprehensive Insurance covers loss or damage to immovable property.
In terms of the National Credit Act, a credit provider is permitted to charge a consumer a fee for entering into a credit agreement with them. This Initiation Fee is intended to cover all costs incurred in completing the credit process (e.g. obtaining credit bureau reports, valuations, deed searches etc) as well as initial administration expenses. This amount is worked out in terms of the loan
value/parameters laid down in the Act.
This is the basic monthly amount paid for your home loan. The instalment payment typically will comprise the monthly interest on the loan as well as an element of capital repayment, together with any monthly costs and insurance premiums.
INTERIM INTEREST PROVISION
Applies to “switch bonds” only. After your bond has been approved, SA Home Loans applies for cancellation figures from your current lender. These figures are deduced by adding the loan amount outstanding + 3 month’s interest. We call this “interim interest”. This interim provision is required by banks in order to safeguard themselves against a shortfall in the amount outstanding on registration with SA Home Loans. On registration, we pay the full cancellation fees to your lender, who then refunds you with the interim interest in full, provided your account has been conducted normally.
The annual rate charged to a borrower on a loan. Interest is calculated on the daily balance of the loan and capitalised monthly.
The Johannesburg Interbank Agreed Rate is a 3 month deposit rate. It is a South African money market rate which is determined by a number of local and international banks, and updated on a daily basis. The rate achieved is in yield form and is quoted as the 3 Month JIBAR rate. This rate is published each day by 11h00 on Reuters on the SAFEX page.
LOAN TO VALUE (LTV)
The value of the mortgage loan, or the amount that the borrower wishes to borrow, expressed as a percentage of the market value of the property, or the estimated value of the property.
The amount that a willing and financially able buyer would pay to a willing and able seller, provided that the property had been effectively exposed to the market for a reasonable period of time.
A loan made to the owner of a property where the property is the security for the loan. The mortgage bond is registered in the Deeds Office against the title deed of the property.
Lender (creditor), usually a bank, who advances or lends money on the security of a property purchased.
Borrower (debtor) who borrows from a lender by mortgaging his property to the lender as security.
The Net Present Value (NPV) is the value of a future sum of money which is calculated and expressed in today’s terms.
Assets that cannot be easily converted into money.
OFFER TO PURCHASE
This is a formal (written) offer made by a purchaser on a home that is offered for sale. This is usually concluded via an estate agent – and signed by all parties. It is normally subject to a time limit and may be 'clean' (usually a cash purchase) or “conditional” (usually subject to bond finance being obtained or a home being sold).
The packaging of home loans in an insolvency remote entity, and the simultaneous issue of financial securities to investors at a lower interest rate than would be payable if a bank were providing funds. The risk to investors is negligible and therefore they are willing to accept a lower return on their investment.
The credit provider charges a consumer this fee for monthly servicing and maintaining of the credit agreement between them. In terms of the National Credit Act, this fee may not exceed R50 incl VAT per month.
A clause in an agreement of sale whereby the validity of the contract is made subject to the occurrence (or non-occurrence) of a future event e.g. the granting of a bond, of a certain amount, before a certain date.
A bond that you had previously with one financial institution but then changed to SA Home Loans.
The period (usually expressed in months) over which the borrower intends to repay the mortgage bond. This is typically 20 years (240 months). The monthly instalment paid is therefore a function of the amount borrowed, the interest rate and the repayment term. At SA Home Loans all clients are entitled to repay their bond over a shorter term than originally specified if they so choose.
Legal document registered at a Deeds Office, as evidence (proof) of ownership of a property by the registered home owner.
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Ready to apply? You can apply online at www.sahomeloans.com, on our mobi-site at
m.sahomeloans.com or phone 0860 2 4 6 8 10 to complete an application with our Sales Contact Centre.